Thursday, April 26, 2012

piigS !

Dr. A. H. Krieg

S is for Spain one of the five piigs. Spain announced this week that no business would be allowed to make any cash transactions over $2,500 Euros. They are trying to stop barter transactions and cash transaction in order to stop Spaniards from circumventing the taxman. The situation in Spain is catastrophic and the situation for the EURO zone is dire, Spain’s economy is much too large for a bailout, BIS, IMF, & ECB are all well aware of this. Worldwide financial exposure of Spain exceeds one trillion dollars. Due to the ridiculous waste created in a national green energy policy the average unemployment level is 23.6% and for Spaniards under 25 years of age its 50.5%. Electric energy costs primarily due to green energy projects reflect energy costs of 27.06 E. Spain, 28.39 E. Italy, and 25.25 E. Portugal in KWH whereas American average is $17.4. Higher energy costs, causes manufacturing, which relies on energy costs due to largest consumption, to move into areas with lower electric energy costs.

Facts about Spain, Greece and Italy as well as all the PIGS is scant in America because the reporting media journalists are insular and think of America as a stand alone economy which it most certainly is not. Banking loans in Spain are 170% of Spanish GDP. Default on business as well as individual loans is an 18-year high. In order to keep the Spanish economy functioning Spanish banks borrowed E. 169.2 billion in February and E 316.3 billion in March from the ECB some of whose available funds come from the FRS, World Bank, BIS, and IMF, all of which are partially funded with US dollars from the FRS. According to available information the people of Spain have given up, in March 2012 removed E 65 billion from Spanish banks out of country.

Just like here in America with Freddie and Fannie, in Spain the largest mortgage holder is cajas and just like here cajas was until recently almost totally unregulated. The Banks comprising cajas account for over half of Spain’s national bank deposit markets. What you must understand is that the Spanish housing bubble makes the American one seem like a small speed bump, now consider that over half of the Spanish banking industry is unregulated. And just like here, sub-priming and sub-sub-prime borrowers who obtained mortgages with nothing down, no assets, and dubious re-payment abilities, in other words worthless paper, constitutes most of the Spanish mortgage market of banking assets.

The Spanish stock market has been in freefall for the last 40 days, and is anticipated to collapse shortly. Long-term outlook is dampened by a continuous 15-year decline. The frightening issue is the eventual possibility that Spain will drag the entire EU down with it. Considering that Italy with an economy even larger than that of Spain is in about the same boat, also with a debt load of over one trillion dollars, we see only black on the EU horizon.


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